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ECB to cut PEPP and APP amid inflation hike

ECB to cut PEPP and APP amid inflation hike

The European Central Bank is planning to reduce the financial support aimed at the EU economy. The decision was driven mainly by the record-high inflation rate. The central bank has already revised its Pandemic Emergency Purchase Program (PEPP) and is preparing to proceed with action following a detailed roadmap.

The eurozone economy is steadily growing along with its high-rise inflation rate. The latter reached 3%, breaking above its 10-year high. Money in the EU is rapidly depreciating, and the central bank is forced to take measures. Among the main ones, there are slowing money-printing and reducing the volume of cheap money. Market participants welcome the ECB decision and are looking forward to winding down the asset purchase program, launched in March 2020 during the pandemic. Notably, the ECB buys €80 billion worth of securities monthly.

The ECB still has an active Asset Purchase Program (APP) in operation. The program’s budget is estimated at €20 billion monthly. The PEPP and APP became the main ECB’s instruments to buffer the consequences of the pandemic. They provided the EU countries with efficient financial support. However, the global supply chain disruptions are accelerating the growth of consumer prices. The increase in prices has to be stopped. Therefore, the ECB will continue to gradually cut budgets and reduce stimulus programs.

 

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